Chile’s large-scale hydro project sparks controversy

June 15, 2011

By the Potencia correspondent

In early May, authorities in Chile gave the green light to a controversial hydroelectric project, namely the 2750 MW HidroAysen, which has been presented as crucial to meeting the country's growing energy demands, but many worry it represents a potential environmental hazard.

As thousands of protesters took to the streets, the multi-billion dollar investment was approved. Its defenders believe it is what the Chile needs to meet a shortfall in energy generation.

Once completed it is expected to produce 2.75 GW of electricity, which is the equivalent to 20 per cent of the country’s current capacity. In return, this would help mitigate Chile's energy demand, which is expected to increase to 80 per cent by 2025.

The project encompasses the construction of five hydroelectric power stations, two along the Baker River and three on the Pascua River, in an area approximately 1600 km south of Santiago, officials have said.

The protests are set to continue despite claims of the heavy use of water hoses and tear gas by autjorities. Late in May, thousands took to the streets again, leaving both protesters and law enforcers injured.

Separately, the New York Times said the construction of this project could be "potentially disastrous". It urged the Natural Environmental Commission to reject the project.

Opponents of the project believe the energy generated by HidroAysen would be used chiefly for the mining sector. They believe the environmental review has been flawed, and that the Chilean government should pursue solar and wind energy generation to counter potentially huge damage to the environment.

Local opinion polls have shown that most Chileans also oppose the project.

Opposition to the project comes as recent estimates highlight the country must double its current installed capacity of 15 000 MW over the next ten years to keep up with demand.

However, the project's controlling consortium of Chile's Endesa and the Spanish firm Colbun SA have said the project is environmentally sound as it would produce clean, renewable energy and diminish demand for imported fossil fuels.

Chile's president, Sebastian Pinera, has also defended the project: "If HidroAysen is approved it would be 100 per cent in compliance with environmental legislation. If we don't have hydroelectric energy, there will be more coal fired power plants."

Already the initial costs of the project are said to be much higher than expected. Endesa CFO Eduardo Escaffi said at the BNamericas Hydropower Summit Latin America in São Paulo that the project is likely to cost around $10bn. Previous cost estimates of the project stated investment would be around $7bn.

It is expected to take five decades to build. HidroAysen will also need to construct an almost 2000-km power transmission line to transmit the electricity to central Chile, which will cut through vast swaths of untouched land.

The project still requires an environmental impact study for its transmission line, which it expects to carry out by the end of 2011.

HydroAysen is not the only project that has proven controversial in the South American nation. There has also been considerable opposition to the Hacienda Castilla coal fired power project in the north of the country, which was approved earlier this year by the environmental authorities.

Brazilian billionaire Eike Batista's MPX Energia SA is developing the coal fired power plant, which is expected to have an installed capacity of 2227 MW.

HydroAysen is not the only hydro power projects in the region either. Accenture sales director Mickey Peters recently said hydropower is set to maintain its supremacy in the region.

According to Peters, 70-90 GW of new capacity will come online in the region by 2035, including Brazil's 11.2 GW Belo Monte and HidroAysen, meaning investments in the order of $100bn to $140bn, BNamericas reported.

Parallel to the construction of new projects, Chile's government has created a new body to consult on the country's long-term energy mix and provide a platform for debate.

Chile has targeted 20 per cent of installed capacity from non-conventional renewable sources in the next decade, and this new committee will help to identify how to make up the other 80 per cent, according to Laurence Golborne, mining and energy minister.

The experts will analyze different generation options, including traditional thermo and hydro sources, and transmission issues, authorities have said.

According to IHS Global Insight Daily Analysis, the implications of the government's energy policy are delicate as the subject of energy has become a hot political issue.

"The Energy Ministry's achievements over the past year seem fairly modest but if, as expected, the government accepts the Environmental Committee's verdict on the HidroAysen project and the proposed interconnection between the country's two main grids also goes ahead, then the Piñera administration will leave a more substantial legacy to the energy sector," IHS said in a note to investors.